Real estate markets are entering a new phase. Nationally, investment markets are evolving to suit new demands from consumers. Here in Florida, theses changes are causing ripples of concern for investors and residential developers. What does the generational shift mean for the future of residential real estate and what can investors and and residential developers due to anticipate and adapt to these changes?
Jean Francois Roy, Founder and President of Ocean Land Investments shares with us his story and discusses the importance of flexibility as a residential developer and investor to find success in the market. Beginning his foray into residential real estate in his native Quebec, Canada, Jean Francois focused on developing high-end retirement living spaces. Following the American economic recession in the early 1990s, Jean Francois moved his venture to Florida, focusing on Ft. Lauderdale markets. Jean Francois quickly realized that flexibility and understanding the demands of the market was imperative for the success of any residential developer or investor. Ocean Land Investments continues to be a leading residential real estate firm due to Jean Francois’ drive and flexibility.
Residential Developers: Purchase land during market/economic slumps
Markets with high populations reduce vacancy risks
Adapt to market demands
In Ft. Lauderdale, high retirement-age demographic good for multi-family residential (apartments, condos)
Recognize consumer trends
“Going green” – buyers and tenants willing to pay premiums for environmentally-geared projects/renovations
Shift towards “conservative” structures from “extravagance” of 2000s
Be amenable to joint ventures and refurbishment projects as opposed to new developments
Be wary of overambitious or amateur developers straining the market
To contact Jean Francois Roy or to find out more about investment, leasing, or purchasing options with Ocean Land Investments, call the office at (954) 558-3187 or visit their website
Winter is coming… And so are national interest rate increases.
The Federal Reserve has recently announced a new national interest rate hike, the first since 2006. Real estate investors are very anxious about the announced rate hike. Many investors are wary that the rate hike may be instituted prematurely in an economy that is not capable of facilitating the effects on real estate markets.
Mark Fleming, Ph. D. serves as the Chief Economist for First American Financial Corporation. With over 20 years’ experience in mortgage and property information, Mark analyzes and forecasts national mortgage and real estate markets. This episode, Mark lends his expertise to our discussion on the new rate hike‘s effect on current real estate markets at a national level, and tells us why investors shouldn’t be so worried.
Federal Reserve Rate Hikes
First rate hike in 9 yrs
2006 – +5% increase
2007 -’08 to Present – 0%
End of Year (2015) – .25% increase
2016 – +1% increase
Instituted to correlate with expected income/wage growth
Long-term, fixed-rate loans not affected
Good for housing markets
House-price appreciation seeing “asset inflation”, especially in Florida
5-6% nationally, higher in FL markets (South Florida)
Out-pacing current wage growth, causing increase in housing rates
Rate hike should slow appreciation growth rate
2016 and Beyond
Rate hike est. 5% increase
House-appreciation (Nationally) projected to slow to 3-4%
Income growth est. 3-4% increase
Commercial real estate to benefit from economic growth
Multi-family to benefit from strong millennial rental market
Jay Smith, CEO of A Snoop Inspections, is a veteran in his field of property inspection. Jay possesses over 30 years in property inspection experience as well as hands-on knowledge of building construction. Jay has an invaluable insight into the key concepts of inspecting properties.
Property inspections can cause even the most seasoned real estate investor to shudder. Not only do inspections have the potential to turn up devastating issues for investors close to finalizing a deal, under-qualified inspectors may cost an investor thousands of dollars in corrective aggravation. Recent changes to insurance policies and coverage in Florida have led to increased concern over property inspections and their impact on real estate investment. Commercial investors need to be especially careful as there are many more aspects to commercial property inspection as opposed to residential. This episode will cover six hot spots or areas of focus for any investor to cover when inspecting properties.
Out-dated wiring methods may preclude properties from meeting current insurance requirements
Aluminum wiring dating mid 1960s-1970s a prevalent issue; Cloth wiring; Knob-and-tube wiring
No safety outlets by water areas source of concern
Major area of concern when inspecting properties. Damage can be detrimental to property and repairs costly.
Look for flat roofs or areas where water pools
Leaks cause major damage
A/C units on roofs – water damage from condensation, impede accessible roof maintenance. New FL building codes require roof-units be on raised platforms
Changes to FL insurance coverage a important concern for new buyers
Standards for coverage have changed over recent years
Require more detailed inspections, won’t insure certain construction methods/materials
Insurance coeerage under previous owner will not extend to new buyer
Costly and potentially dangerous inspection issue
Look for long, horizontal cracks in and around structure
$2000 geo-technical survey
Serious issue in FL
Difficult to asses severity or extent of infestation
Especially an issue in vacant or untended properties
Inspector Due Diligence
In FL especially, determine certifications of inspectors prior to selecting
FL requires Home Inspector license only
International Association of Home Inspectors – largest H.I. association in U.S.
For specific issues, contact specialists (i.e. mold inspector, master electrician, professional roofer)
To contact Jay for information on inspecting properties or to inquire about his own property inspection services, visit his website: www.a-snoop.com or call (813) 345-2600
A big concern for new real estate investors is the question of how to raise financing and build capital. Many investors are intimidated by traditional methods; using institutional debt-equity options and financing. Many who are hesitant about financing are unaware of alternative financing options. We have discussed alternative financing previously on the show, but this episode focuses on a specific method: syndicating real estate.
Jefferson Lilly also has a special focus when it comes to real estate investing. Jefferson specializes exclusively in mobile-home park property markets. Through his own company, Lilly & Company as well as through his co-partnership with Park Street Partners, Jefferson owns and manages 10 mobile-home parks from Wyoming to Ohio. Park Street Partners specializes in syndicating real estate deals, operating through a registered blind fund as opposed to raising financing through singular deals.
Things to Know About Syndicating Real Estate:
“Fundraising takes a life of its own”
Reputation and word-of-mouth marketing produces a snowball effect in syndicating real estate
More successfully executed deals translates to a greater willingness from investors to devote capital
Roughly $7500 to establish offering memorandum template in syndicating
Roughly equivalent in legal costs per deal for one-off financing
Blind funds- investors pool capital and allow broker/agent to make executive investment decisions
Largely adaptive to outsourcing options for financing and fundraising
Investors may conduct due diligence on broker/agents existing transaction records
Stipulations to Syndicating Real Estate
SEC requires strict operating stipulations for funds